Market Overview

Popular, Inc. Announces Third Quarter Financial Results

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  • Net income of $20.7 million for the third quarter of 2017,
    reflecting $79.4 million in hurricane-associated expenses and an
    income tax benefit of $20.0 million
  • Net interest margin of 3.96% in Q3 2017, compared to 4.02% in Q2
    2017
  • Credit Quality (excluding "covered" loans):
    • Non-performing loans held-in-portfolio ("NPLs") as of Q3 2017
      increased by $38.8 million from Q2 2017; NPLs to loans ratio as of
      Q3 at 2.5% vs. 2.4% in Q2 2017;
    • Net charge-offs ("NCOs") decreased by $4.5 million; NCOs at
      0.92% of average loans held-in-portfolio vs. 1.01% in Q2 2017;
    • Provision expense of $157.7 million, which includes a $66.4
      million provision for loan losses related to the hurricanes and a
      $37.0 million provision related to the U.S. segment's taxi
      medallion portfolio;
    • Allowance for loan losses of $613.9 million vs. $509.2 million
      in Q2 2017; allowance for loan losses to loans held-in-portfolio
      at 2.65% for Q3 vs. 2.22% in Q2 2017; and
    • Allowance for loan losses to NPLs at 104.8% for Q3 vs. 93.1% in
      Q2 2017.
  • Common Equity Tier 1 ratio of 16.63%, Common Equity per Share of
    $51.31 and Tangible Book Value per Share of $44.79 at September 30,
    2017

Popular, Inc. (the "Corporation," "Popular," "we," "us," "our,")
(NASDAQ:BPOP) reported a net income of $20.7 million for the quarter
ended September 30, 2017, compared to a net income of $96.2 million for
the quarter ended June 30, 2017. The results for the quarter reflect the
impact of Hurricanes Irma and Maria on those markets in which the
Corporation operates a significant portion of its business, including
Puerto Rico, the U.S. Virgin Islands ("USVI") and the British Virgin
Islands ("BVI").

Ignacio Alvarez, President and Chief Executive Officer, said:
"Hurricanes Irma and Maria struck Puerto Rico and the Virgin Islands in
a two-week period, leaving unprecedented destruction in their wake.
Since day one, our priority has been to take care of our clients, our
colleagues and our communities.

For the past five weeks, we have been dealing with the logistical
challenges resulting from the collapse of the electric, water and
telecommunications systems in Puerto Rico. Despite these challenges, we
have worked relentlessly to provide access to cash and other essential
banking services as quickly as possible. Thanks to the efforts of our
colleagues, which have been nothing short of heroic, the number of
branches and ATMs in operation has increased consistently. Only one week
after Maria, we had 53 branches out of 168 and 150 ATMs out of 635 up
and running, as well as all digital channels, which remained available
throughout and after the hurricane. We currently have 137 branches and
397 ATMs in operation, covering the entire island, including Puerto
Rico's central mountain region and the island municipalities of Culebra
and Vieques, which were severely impacted by the hurricanes. In the U.S.
and British Virgin Islands we are currently operating 7 out of our 9
branches.

We are working closely with our clients to assess their needs, help them
rebuild and take advantage of opportunities that will surely arise. To
provide relief, we offered automatic payment deferrals and loan
extensions to most of our clients. In addition, we have taken various
measures to support our employees in these difficult times, including
monetary assistance to those that suffered significant damages to their
homes and interest-free loans.

We also mobilized to help severely impacted communities through
Fundación Banco Popular and the Popular Community Bank Foundation, our
philanthropic arms. We launched the Embracing Puerto Rico effort, seeded
the fund with a $1.1 million donation and have obtained additional funds
thanks to the generosity of partners, suppliers and friends. We also
contributed to "Unidos por Puerto Rico", a fundraising campaign
spearheaded by Puerto Rico's First Lady and were one of two sponsors of
the "Somos Una Voz" concert that has raised over $35 million for
earthquake victims in Mexico and hurricane victims in Texas, Florida,
Puerto Rico and the Caribbean. Fundación Banco Popular is leveraging the
relationships it has developed with non-profit organizations and
community leaders throughout its almost 40-year history, delivering
assistance directly to those who need it most.

While deeply saddened by the human losses and material damage brought by
the hurricanes, the resilience we have witnessed inspires us and gives
us confidence that we will recover and emerge stronger than before. The
current situation presents a unique opportunity to make much needed
structural changes on the island, and, as the leading financial
institution, Popular is ready to play an important role in efforts to
build a stronger and more sustainable Puerto Rico."

Significant Events

During the month of September, Hurricanes Irma and Maria (the
"hurricanes") made landfall and subsequently caused extensive
destruction in Puerto Rico, the U.S. and British Virgin Islands,
disrupting the markets in which Banco Popular de Puerto Rico ("BPPR")
does business.

On September 6, 2017, Hurricane Irma made landfall in the USVI and the
BVI as a Category 5 hurricane on the Saffir-Simpson scale, causing
catastrophic wind and water damage to the islands' infrastructure, homes
and businesses. Hurricane Irma's winds and resulting flooding also
impacted certain municipalities of Puerto Rico, causing the failure of
electricity infrastructure in a significant portion of the island. While
hurricane Irma also struck Popular's operations in Florida, neither our
operations nor those of our clients in the region were materially
impacted.

Two weeks later, on September 20, 2017, Hurricane Maria, made landfall
in Puerto Rico as a Category 4 hurricane, causing extensive destruction
and flooding throughout Puerto Rico. As a result of the Hurricane, 100%
of the island's population was left without electrical power and there
was significant disruption to the water distribution system. Other basic
utility and infrastructure services such as communications, ports and
transportation were also materially affected, causing a significant
disruption to the island's economic activity.

Prior to the hurricanes, the Corporation had implemented its business
continuity action program. Although the Corporation's business critical
systems experienced minimal outages as a result of the storms, the
Corporation's physical operations in Puerto Rico, the USVI and the BVI,
including its branch and ATM networks, were materially disrupted by the
storms mostly due to lack of electricity and communication as well as
limited accessibility. Currently, 82% of BPPR's bank branches are open
and 63% of ATMs are operating. Popular is working on a plan to reopen
its remaining closed retail locations as soon as possible.

Reconstruction of the island's electric infrastructure and restoration
of the telecommunications network remain the most critical challenges
for Puerto Rico's recovery from the hurricanes. As of October 27, 2017,
the Government of Puerto Rico estimated that electricity generation
remained at 28% of pre-hurricane levels. "Point of sale" (POS) activity
throughout the Island has been impacted by lack of electricity and
telecommunications at many merchant locations. By the third week of
October, debit and credit card purchase activity from our clients stood
at approximately 55% to 65% when compared to pre-hurricane activity.

Impact on Earnings Related to Hurricanes

The following summarizes the estimated impact on the Corporation's
earnings for the quarter ended September 30, 2017 as a result of the
impact caused by Hurricanes Irma and Maria, net of estimated insurance
receivables of $7.5 million.

(In thousands)  

Quarter ended
September 30, 2017

Provision for loan losses (1)

  $ 69,887
Operating expenses:  
Personnel costs $ 58
Net occupancy expenses 468
Business promotion
Donations 1,123
Other sponsorship and promotions expenses     203
Total business promotion     1,326
OREO expenses 2,685
Other expenses
Write-down of premises and equipment 3,932
Other operating expense     1,033
Total other expenses     4,965
Total operating expenses   $ 9,502
Total pre-tax hurricane expenses   $ 79,389
 

(1) Includes $3.5 million in provision for covered loans.

Provision for Loan Losses

Damages associated with Hurricanes Irma and Maria impacted certain of
the Corporation's asset quality measures, including higher delinquencies
and non-performing loans. Payment channels, collection efforts and loss
mitigation operations were interrupted during the last month of the
quarter as a result of the hurricanes. An incremental provision expense
of $69.9 million was made to the allowance for loan losses based on
management's best estimate of the impact of the hurricanes on the
Corporation's loan portfolios and the ability of borrowers to repay
their loans, taking into consideration currently available information
and the already challenging economic environment in Puerto Rico prior to
the hurricanes.

Management has initially estimated that the effects of the hurricanes
could result in loan losses in the range of $70 to $160 million.
However, since the Corporation's base allowance for loan losses already
incorporated reserves for environmental factors such as unemployment and
deterioration in economic activity of approximately $58 million,
management increased the environmental factors reserve by $64.3 million
to $122.2 million using the near mid-range as the best estimate. The
$69.9 million provision also includes $5.6 million for the portfolio of
purchased credit impaired loans, accounted for under ASC 310-30, for
which the estimated cash flows were adjusted to reflect the three-month
payment forbearance offered to certain eligible borrowers, as discussed
above. Since there is significant uncertainty with respect to the full
extent of the impact due to the unprecedented nature of Hurricane Maria,
the estimate is judgmental and subject to change as conditions evolve.
Management will continue to carefully assess and review the exposure of
the portfolios to hurricane-related factors, economic trends and their
effect on credit quality. Refer to additional information on the Credit
Quality section of this earnings release.

Operating Expenses

The Corporation has over 200 branches and office buildings and over
2,000 repossessed properties in the areas affected by the hurricanes.
While the Corporation has completed a preliminary estimate of the
physical damages to these properties, it has been unable to individually
examine each of these properties. As the Corporation continues to
evaluate the extent of the damages, additional adjustments may be
necessary. However, the Corporation believes that given its level of
insurance coverage, the estimated impact of damages to these properties
should not vary materially.

The results for the quarter include $6.6 million in expenses, net of
$7.5 million in insurance receivables, from structural damages caused by
the hurricanes to branches, buildings and repossessed properties as a
result of the hurricanes. An additional $2.9 million in other operating
expenses are reflected for costs such as donations, debris removal, fuel
for backup generators and other ancillary costs associated with
hurricane recovery efforts.

Expenses for the fourth quarter are expected to be between $320 and $330
million and consistent with our previous estimate of annual expenses.

Revenue Reduction

In addition to the previously mentioned incremental provision and direct
operating expenses, results for the three months ended September 30,
2017 were impacted by the hurricanes in the form of a reduction in
revenue resulting from reduced merchant transaction activity, the waiver
of certain late fees and service charges, including ATM transaction
fees, to businesses and consumers in hurricane-affected areas, as well
as the economic and operational disruption in the Corporation's mortgage
origination, servicing and loss mitigation activities due to the
hurricanes' operational and economic impact. These revenue captions
resulted in a decrease in income of approximately $11 million in lower
income when compared to the previous quarter, primarily driven by the
disruption in our operations over the last 10 days of the quarter.

While the continued impact on transactional and collection based
revenues will depend on the speed at which electricity,
telecommunications and general merchant services can be restored across
the region, we currently estimate that revenues in the fourth quarter
could be further negatively impacted in an amount representing an
additional $5 to $20 million from this quarter's results, excluding any
impact on valuation of MSRs.

Refer to the Interest Income, Non-Interest Income and Expense sections
of this earnings release for further information.

Earnings Highlights                  
 
(Unaudited)   Quarters ended Nine months ended
(Dollars in thousands, except per share information)   30-Sep-17   30-Jun-17   30-Sep-16 30-Sep-17 30-Sep-16
Net interest income $378,171 $374,479 $ 353,687 $ 1,114,748 $ 1,066,650
Provision for loan losses 157,659 49,965 42,594 249,681 130,202
Provision for loan losses - covered loans [1]   3,100     2,514       750     4,255       (1,551 )
Net interest income after provision for loan losses 217,412 322,000 310,343 860,812 937,999
FDIC loss-share expense (3,948 ) (475 ) (61,723 ) (12,680 ) (77,445 )
Other non-interest income 104,322 117,268 137,701 345,716 375,556
Goodwill impairment charge - - 3,801 - 3,801
Other operating expenses   317,088     306,835       319,871     935,241       930,963  
Income before income tax 698 131,958 62,649 258,607 301,346
Income tax (benefit) expense   (19,966 )   35,732       15,839     48,772       80,550  
Net income   $20,664     $96,226     $ 46,810   $ 209,835     $ 220,796  
Net income applicable to common stock   $19,734     $95,295     $ 45,880   $ 207,043     $ 218,004  
Net income per common share - Basic   $0.19     $0.94     $ 0.44   $ 2.03     $ 2.11  
Net income per common share - Diluted   $0.19     $0.94     $ 0.44   $ 2.03     $ 2.11  
[1] Covered loans represent loans acquired in the Westernbank
FDIC-assisted transaction that are covered under an FDIC
loss-sharing agreement.

Net interest income

Net interest income for the quarter ended September 30, 2017 was $378.2
million, compared to $374.5 million for the previous quarter. The impact
of having one more day in the quarter had a positive effect in net
interest income of $2.7 million. Net interest margin was 3.96% for the
quarter compared to 4.02% for the previous quarter.

The increase of $3.7 million in net interest income was mainly related
to the following:

Positive variances:

  • Higher income from money market investments by $4.4 million, or 21
    basis points, due to both a higher average volume of funds available
    to invest related mostly to a higher balance of deposits and a higher
    yield due to the increases in rates by the U.S. Federal Reserve late
    in the second quarter of 2017. The average rate of the money market
    investments portfolio for the quarter was 1.27%, compared to 1.06% in
    the second quarter of 2017;
  • Higher income from commercial loans by $6.1 million, or 6 basis
    points, driven by higher average loan balances in both U.S. and Puerto
    Rico and a higher yield at BPPR due in part to one additional day in
    the quarter and the impact on the variable rate portfolio from the
    above-mentioned increases in rates; and
  • Higher income from the consumer loans portfolio by $1.9 million, due
    to higher balances in both U.S. and Puerto Rico mostly resulting from
    loans acquired during the quarter, partially offset by lower yields
    mainly in the credit cards portfolio and the waiver of late payment
    fees from clients granted as part of Popular's hurricane relief
    efforts,

Negative variances:

  • Lower interest income from investment securities by $1.3 million, or 2
    basis points, mainly due to lower yields, particularly on mortgage
    backed securities and collateralized mortgage obligations, and lower
    average balances driven by the amortization and prepayments of the
    portfolios;
  • Lower income from mortgage loans by $2.5 million, or 10 basis points,
    due to lower yields impacted by loan delinquencies as a result of the
    business disruption from hurricanes Irma and Maria and the
    above-mentioned waiver of late payment fees to clients. Also, lower
    average balances resulting from lower lending activity and portfolio
    run-off both in P.R, and the U.S., contributed to the decline.
  • Lower income from the portfolio acquired from Westernbank ("WB loans")
    by $2.0 million, due to the normal portfolio amortization and lower
    yields; and
  • Higher interest expense from deposits by $0.3 million, or 3 basis
    points, mostly due to higher volume of government and commercial
    deposits in Puerto Rico, a higher volume of time deposits in the U.S.
    to fund its commercial loan growth and the negative impact of one more
    day in the quarter.

BPPR's net interest income amounted to $321.1 million for the quarter
ended September 30, 2017, compared to $319.7 million for the previous
quarter. The increase of $1.4 million in net interest income was mainly
due to higher income from money market investments resulting from higher
volumes and yields, as previously stated. Also, the results for the
quarter reflected a higher yield from commercial loans resulting from
higher volumes and the increase in market rates and higher income from
consumer loans due to the acquisition of loans, as discussed above.
These positive variances were partially offset by lower income from
mortgage loans impacted by delinquencies resulting from the business
disruption from Hurricanes Irma and Maria and the waiver of late payment
fees related to the hurricanes, lower income from WB loans and higher
interest expense on deposits mainly from the P.R. government. The net
interest margin for the third quarter was 4.28%, a decline of 8 basis
points when compared to 4.36% for the previous quarter. The decrease in
net interest margin results mainly from the composition of earning
assets, which has shifted towards lower yielding assets resulting from
higher balances of Fed Funds, mainly as a result of higher balances of
deposits and lower volume of WB loans, which carry a high yield relative
to the non-WB portfolio. Puerto Rico assets yielded 4.63%, compared to
4.69% in the previous quarter, while the cost of interest bearing
liabilities was 0.49%, compared to 0.46% in the previous quarter.

Banco Popular North America's ("BPNA") net interest income was $71.5
million, compared to $69.7 million in the previous quarter, mainly due
to higher income resulting mostly from higher volume of commercial and
consumer loans and the positive impact of one more day in the quarter,
partially offset by higher deposit and short-term borrowing costs. Net
interest margin decreased 4 basis points to 3.50%, compared to 3.54% for
the previous quarter mostly due to higher cost of funds. U.S. earning
assets yielded 4.29%, compared to 4.30% in the previous quarter, while
the cost of interest bearing liabilities was 1.03% compared to 0.99% in
the previous quarter.

Non-interest income

Non-interest income amounted to $100.4 million for the quarter ended
September 30, 2017, compared to $116.8 million for the previous quarter.
The results for the quarter reflect a reduction in various revenue
streams, as a result of the impact of Hurricanes Irma and Maria. The
reduction in revenues resulted from business interruptions causing lower
volumes of transactions as well as disaster relief measures taken by the
Corporation to help its customers. The unfavorable variance of $16.4
million in non-interest income was primarily driven by:

  • Lower other service fees by $5.7 million mainly in credit and debit
    card fees at BPPR largely impacted by lower interchange income
    resulting from lower transaction volumes due to the business
    disruption in the regions impacted by the hurricanes and the waivers
    of credit card late fees during the month of September as a result of
    the disaster relief measures for customers implemented in response to
    the hurricanes;
  • Lower income on mortgage banking activities by $5.5 million due to
    lower mortgage servicing fees driven by an increase in delinquency,
    due to the impact of the hurricanes on payment channels, collection
    and loss mitigation efforts; higher unfavorable fair value adjustments
    on mortgage servicing rights; and lower net gain on sale of loans
    mostly due to lower volume from securitization transactions also in
    part due to the aforementioned business disruption;
  • Unfavorable variance in adjustments to indemnity reserves of $3.5
    million due to an increase in the reserve for credit recourse;
  • Higher FDIC loss-share expense by $3.5 million due to an unfavorable
    impact in the mirror accounting of impaired loans and higher
    recoveries on assets to be shared with the FDIC in the recovery
    period; and
  • Lower other operating income by $5.4 million mainly due to lower
    earnings from investments under the equity method.

These negative variances were partially offset by an
other-than-temporary impairment charge of $8.3 million on senior Puerto
Rico Sales Tax Financing Corporation ("COFINA") bonds classified as
available-for-sale recorded during the previous quarter.

Refer to Table B for further details.

Financial Impact of the 2010 FDIC-Assisted Transaction    
 
(Unaudited)   Quarters ended
(In thousands)   30-Sep-17   30-Jun-17   30-Sep-16
 

Income Statement

Interest income on WB loans $ 35,939 $ 37,900 $ 40,867
Total FDIC loss-share expense (3,948 ) (475 ) (61,723 )
Provision (reversal) for loan losses- WB loans [1]     14,751       (417 )     6,612  
Total revenues less provision (reversal) for loan losses   $ 17,240     $ 37,842     $ (27,468 )
 

Balance Sheet

WB loans $ 1,705,531 $ 1,737,448 $ 1,896,099
FDIC loss-share asset 48,470 52,583 152,467
FDIC true-up payment obligation     166,876       163,668       134,487  
[1] The quarter ended June 30, 2017 includes the
elimination of an incremental $6.0 million provision for loan losses
related to the inter-company transfer of a loan between BPPR and
Popular, Inc., its bank holding company, the impact of which is
eliminated in the consolidated results of the Corporation in
accordance with U.S. GAAP.

See additional details on accounting for the 2010 FDIC-Assisted
transaction in Table O.

Operating expenses

Operating expenses amounted to $317.1 million for the third quarter of
2017, an increase of $10.3 million when compared to the second quarter
of 2017. The increase in operating expenses was driven primarily by:

  • Higher personnel cost by $0.8 million mostly due to higher salaries;
  • Higher business promotion expense by $1.9 million mainly due to higher
    donations, which includes $1.1 million in donations to the hurricane
    relief efforts, and higher advertising expense, partially offset by
    lower customer reward program expense; and
  • Higher other operating expenses by $13.8 million which includes $3.9
    million of write-down of premises and equipment, $1.0 million in
    debris removal and other costs related to Hurricane Maria, higher
    provision for unused commitments by $1.5 million and higher legal
    contingency reserves.

These increases were partially offset by:

  • Lower professional fees by $2.2 million mainly due to lower
    programming, processing and other technology services; and
  • Lower OREO expenses by $4.9 million due to lower write-downs on
    valuation of mortgage properties at BPPR.

Non-personnel credit-related costs, which include collections,
appraisals, credit related fees and OREO expenses, amounted to $15.3
million for the third quarter of 2017, compared to $20.4 million for the
second quarter of 2017. The decrease was principally due to lower
write-downs on OREO at BPPR.

Full-time equivalent employees were 7,787 as of September 30, 2017,
compared to 7,789 as of June 30, 2017.

For a breakdown of operating expenses by category refer to table B.

Income taxes

For the quarter ended September 30, 2017, the Corporation recorded an
income tax benefit of $20.0 million, compared to an income tax expense
of $35.7 million for the previous quarter.

The income tax benefit for the quarter reflects the impact of the losses
related to the hurricanes, which result in a reduction of taxable income
and the related effective tax rate in our Puerto Rico operations, as the
level of exempt income increases in proportion to the Corporation's
taxable income. The Corporation expects its effective tax rate for the
year 2017 to be between 21% and 23%.

Credit Quality

As previously noted, asset quality measures were impacted by the damages
caused by the hurricanes, which led to higher delinquencies and
non-performing loans, as payment channels, collection efforts and loss
mitigation operations were interrupted and mainly unavailable for the
last 10 days of the quarter. A provision was made to the allowance for
loans losses based on management's best estimate of the impact of the
hurricanes on the ability of the borrowers to repay their loans, in
light of an already fragile economy in Puerto Rico prior to the
hurricanes. Management will continue to carefully assess the exposure of
the portfolios to hurricane-related factors, economic trends, and their
effect on credit quality.

In response to the hurricanes' effects on its customers, the Corporation
implemented a 90-day moratorium, equal to three months of suspended
payments for consumer and certain commercial borrowers that were current
or less than ninety days past due in their payments as of September 30,
2017. The following presents asset quality results for the third quarter
of 2017:

  • Total non-performing loans held-in-portfolio increased by $38.8
    million from the second quarter of 2017, driven by higher P.R.
    mortgage NPLs of $31.3 million, negatively impacted by the disruptions
    caused by Hurricane Maria. At September 30, 2017, NPLs to total loans
    held-in-portfolio were at 2.5% compared to 2.4% in the second quarter
    of 2017.
  • Inflows of NPLs held-in-portfolio, excluding consumer loans, increased
    by $13.4 million quarter-over-quarter, mainly driven by higher inflows
    in the P.R. mortgage portfolio of $15.7 million.
  • Net charge-offs decreased by $4.5 million from the second quarter of
    2017, driven by: (i) lower P.R. commercial NCOs of $12.2 million,
    driven by the effect of a $12.3 million charge-off taken on a large
    commercial relationship during the previous quarter, partially offset
    by, (ii) higher U.S. commercial NCOs of $4.9 million related to the
    Taxi Medallion portfolio, and (iii) higher P.R. consumer NCOs of $4.5
    million, mainly due to collection disruptions caused by Hurricane
    Maria. The Corporation's ratio of annualized net charge-offs to
    average non-covered loans held-in-portfolio was at 0.92%, compared to
    1.01% in the second quarter of 2017. Refer to Table J for further
    information on net charge-offs and related ratios.
  • The allowance for loan losses ("ALLL") increased by $104.7 million
    from the second quarter of 2017 to $613.9 million at September 30,
    2017. The P.R. segment ALLL increased by $69.8 million. The
    environmental factors reserve, which considers unemployment and
    deterioration in economic activity, increased by $64.3 million to
    $122.2 million based on management's best estimate, including the
    hurricanes' impact on the loan portfolios using currently available
    information. While the reserve was increased to $122.2 million as the
    near mid-range estimate, management's estimate ranged from
    approximately $70 million to $160 million. The provision expense for
    the quarter also includes $2.1 million for the portfolio of
    non-covered purchased credit impaired loans, accounted for under ASC
    310-30, for which the estimated cash flows were adjusted to reflect
    the three-month payment forbearance offered to certain eligible
    borrowers. Since there is significant uncertainty with respect to the
    full extent of the impact due to the unprecedented effects of
    Hurricane Maria, the estimate is judgmental and subject to change as
    conditions evolve. Management will continue to carefully assess and
    review the exposure of the portfolios to hurricane-related factors,
    economic trends and their effect on credit quality. The U.S. segment
    ALLL increased by $34.8 million, driven by higher reserves for the
    U.S. taxi medallion portfolio.
  • The general and specific reserves related to non-covered loans totaled
    $498.7 million and $115.2 million, respectively, at quarter-end,
    compared with $393.9 million and $115.3 million, respectively, at June
    30, 2017. The ratio of the allowance for loan losses to loans
    held-in-portfolio was 2.65% in the third quarter of 2017, compared to
    2.22% from the previous quarter.
  • The ratio of the allowance for loan losses to NPLs held-in-portfolio
    increased to 104.8%, compared to 93.1% in the previous quarter.
  • The provision for loan losses for non-covered loans for the third
    quarter of 2017 increased by $107.7 million quarter-over-quarter,
    which includes the above mentioned charge of $64.3 million related to
    Hurricane Maria's estimated impact on the P.R. loan portfolios. The
    $34.8 million increase in the U.S. segment was mostly related to
    higher impairments for the taxi medallion portfolio. The provision to
    net charge-offs ratio was 297.4% in the third quarter of 2017,
    compared to 86.92% in the previous quarter.

     
Non-Performing Assets
 
(Unaudited)            
(In thousands)   30-Sep-17   30-Jun-17   30-Sep-16
Total non-performing loans held-in-portfolio, excluding covered loans $ 585,928 $ 547,129 $ 579,325
Other real estate owned ("OREO"), excluding covered OREO     176,728       181,096       184,828  
Total non-performing assets, excluding covered assets 762,656 728,225 764,153
Covered loans and OREO     24,951       29,376       41,211  
Total non-performing assets   $ 787,607     $ 757,601     $ 805,364  
Net charge-offs for the quarter (excluding covered loans)   $ 53,009     $ 57,484     $ 35,140  
 
 
Ratios (excluding covered loans):            
Non-covered loans held-in-portfolio $ 23,173,450 $ 22,918,271 $ 22,595,972
Non-performing loans held-in-portfolio to loans held-in-portfolio 2.53 % 2.39 % 2.56 %
Allowance for loan losses to loans held-in-portfolio 2.65 2.22 2.33
Allowance for loan losses to non-performing loans, excluding loans
held-for-sale
    104.71       93.07       90.73  
 
Refer to Table H for additional information.
 
         
Provision for Loan Losses
 
(Unaudited)   Quarters ended   Nine months ended
(In thousands)   30-Sep-17   30-Jun-17   30-Sep-16   30-Sep-17   30-Sep-16
Provision for loan losses:
BPPR [1] $ 115,115 $ 42,173 $ 36,281 $ 188,766 $ 118,503
BPNA     42,544     7,792     6,313     60,915     11,699  
Total provision for loan losses - non-covered loans   $ 157,659   $ 49,965   $ 42,594   $ 249,681   $ 130,202  
Provision (reversal) for loan losses - covered loans     3,100     2,514     750     4,255     (1,551 )
Total provision for loan losses   $ 160,759   $ 52,479   $ 43,344   $ 253,936   $ 128,651  
[1] For the quarter ended June 30, 2017, and for the nine months
ended September 30, 2017, includes the elimination of an incremental
$6.0 million provision for loan losses related to the inter-company
transfer of a loan between BPPR and Popular, Inc., its bank holding
company, the impact of which is eliminated in the consolidated
results of the Corporation in accordance with U.S. GAAP.
 
 
Credit Quality by Segment
   
(Unaudited)
(In thousands) Quarters ended
BPPR   30-Sep-17   30-Jun-17   30-Sep-16
Provision for loan losses [1] $ 115,115 $ 42,173 $ 36,281
Net charge-offs [1] 45,301 54,255 32,959
Total non-performing loans held-in-portfolio, excluding covered loans 548,666 517,382 551,238
Allowance / non-covered loans held-in-portfolio     3.06 %     2.66 %     2.80 %
[1] For the quarter ended June 30, 2017, includes the elimination of
an incremental $6.0 million provision for loan losses and
corresponding charge-off related to the inter-company transfer of a
loan between BPPR and Popular, Inc., its bank holding company, the
impact of which is eliminated in the consolidated results of the
Corporation in accordance with U.S. GAAP.
 

     
 

 

Quarters ended

BPNA   30-Sep-17   30-Jun-17   30-Sep-16
Provision for loan losses $ 42,544 $ 7,792 $ 6,313
Net charge-offs 7,708 3,229 2,181
Total non-performing loans held-in-portfolio 37,262 29,747 28,087
Allowance / non-covered loans held-in-portfolio     1.48 %     0.94 %     0.78 %
 
     
Financial Condition Highlights
 
(Unaudited)    
(In thousands)   30-Sep-17   30-Jun-17   30-Sep-16
Cash and money market investments $ 6,005,649 $ 4,625,318 $ 4,314,040
Trading and investment securities 9,374,355 9,726,158 7,968,004
Loans not covered under loss-sharing agreements with the FDIC 23,173,450 22,918,271 22,595,972
Loans covered under loss-sharing agreements with the FDIC 524,854 536,341 588,211
Total assets 42,601,267 41,242,669 39,054,296
Deposits 34,248,936 33,122,033 30,327,045
Borrowings 2,147,064 1,968,419 2,364,984
Liabilities from discontinued operations - - 1,815
Total liabilities 37,315,836 35,964,624 33,673,901
Stockholders' equity     5,285,431     5,278,045     5,380,395
 

Total assets increased by $1.4 billion from the second quarter of 2017,
driven by:

  • An increase of $1.3 billion in money market investments, mainly at
    BPPR, due to higher liquidity driven by an increase in deposit
    balances;
  • A net increase of $0.3 billion in non-covered loans held-in-portfolio,
    mainly driven by growth of commercial loans at BPNA; and
  • An increase of $0.2 billion primarily in accounts receivable related
    to maturities of U.S. Treasury securities pending to be settled.

These positive variances were partially offset by:

  • A decrease of $0.3 billion in investment securities available-for-sale
    mainly in U.S. Treasury securities at BPPR.

Total liabilities increased by $1.4 billion from the second quarter of
2017, principally driven by:

  • An increase of $1.1 billion in deposits mainly due to an increase in
    commercial savings and NOW deposits and demand deposits from the
    Puerto Rico public sector at BPPR. Refer to Table G for additional
    information on deposits; and
  • An increase of $0.2 billion in other short-term borrowings at BPNA.

Stockholders' equity increased by approximately $7.4 million from the
second quarter of 2017, mainly as a result of net income for the quarter
of $20.7 million and lower unrealized losses on securities
available-for-sale, offset by declared dividends of $25.5 million on
common stock and $0.9 million in dividends on preferred stock.

Common equity tier-1 ratio ("CET1"), common equity per share and
tangible book value per share were 16.63%, $51.31 and $44.79,
respectively at September 30, 2017, compared to 16.68%, $51.26 and
$44.71 at June 30, 2017. Refer to Table A for capital ratios.

Cautionary Note Regarding Forward-Looking
Statements

This press release contains "forward-looking statements" within the
meaning of the U.S. Private Securities Litigation Reform Act of 1995,
including without limitation those about Popular's business, financial
condition, results of operations, plans, objectives, and future
performance. These statements are not guarantees of future performance,
are based on management's current expectations and, by their nature,
involve risks, uncertainties, estimates and assumptions. Potential
factors, some of which are beyond the Corporation's control, could cause
actual results to differ materially from those expressed in, or implied
by, such forward-looking statements. Risks and uncertainties include
without limitation the effect of competitive and economic factors, and
our reaction to those factors, the adequacy of the allowance for loan
losses, delinquency trends, market risk and the impact of interest rate
changes, capital market conditions, capital adequacy and liquidity, the
effect of legal proceedings and new accounting standards on the
Corporation's financial condition and results of operations, and the
impact of Hurricanes Irma and Maria on us. All statements contained
herein that are not clearly historical in nature, are forward-looking,
and the words "anticipate," "believe," "continues," "expect,"
"estimate," "intend," "project" and similar expressions, and future or
conditional verbs such as "will," "would," "should," "could," "might,"
"can," "may" or similar expressions, are generally intended to identify
forward-looking statements.

More information on the risks and important factors that could affect
the Corporation's future results and financial condition is included in
our Annual Report on Form 10-K for the year ended December 31, 2016, the
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017 and
June 30, 2017, and in our Quarterly Report on Form 10-Q for the quarter
ended September 30, 2017 to be filed with the SEC. Those filings are
available on the Corporation's website (www.popular.com)
and on the Securities and Exchange Commission website (www.sec.gov).
The Corporation assumes no obligation to update or revise any
forward-looking statements or information which speak as of their
respective dates.

Founded in 1893, Popular, Inc. is the leading banking institution by
both assets and deposits in Puerto Rico and ranks among the top 50 U.S.
banks by assets. Popular provides retail, mortgage and commercial
banking services through its principal banking subsidiary, Banco Popular
de Puerto Rico, as well as auto and equipment leasing and financing,
investment banking, broker-dealer and insurance services through
specialized subsidiaries. In the United States, Popular has established
a community-banking franchise providing a broad range of financial
services and products with branches in New York, New Jersey and Florida
under the name of Popular Community Bank.

Conference Call

Popular will hold a conference call to discuss its financial results
today Tuesday, October 31, 2017 at 11:00 a.m. Eastern Time. The call
will be open to the public and broadcasted live over the Internet, and
can be accessed through the Investor Relations section of the
Corporation's website: www.popular.com.

Listeners are recommended to go to the website at least 15 minutes prior
to the call to download and install any necessary audio software. The
call may also be accessed through a dial-in telephone number
1-866-235-1201 or 1-412-902-4127. There is no charge to access the call.

A replay of the webcast will be archived in Popular's website. A
telephone replay will be available one hour after the end of the
conference call through Thursday, November 30, 2017. The replay dial-in
is: 1-877-344-7529 or 1-412-317-0088. The replay passcode is 10113654.

An electronic version of this press release can be found at the
Corporation's website: www.popular.com.

Popular, Inc.
Financial Supplement to Third Quarter 2017 Earnings Release
 
Table A - Selected Ratios and Other Information
 
Table B - Consolidated Statement of Operations
 
Table C - Consolidated Statement of Financial Condition
 
Table D - Consolidated Average Balances and Yield / Rate Analysis -
QUARTER
 
Table E - Consolidated Average Balances and Yield / Rate Analysis -
YEAR-TO-DATE
 
Table F - Mortgage Banking Activities and Other Service Fees
 
Table G - Loans and Deposits
 
Table H - Non-Performing Assets
 
Table I - Activity in Non-Performing Loans
 
Table J - Allowance for Credit Losses, Net Charge-offs and Related
Ratios
 
Table K - Allowance for Loan Losses - Breakdown of General and
Specific Reserves - CONSOLIDATED
 
Table L - Allowance for Loan Losses - Breakdown of General and
Specific Reserves - PUERTO RICO OPERATIONS
 
Table M - Allowance for Loan Losses - Breakdown of General and
Specific Reserves - U.S. MAINLAND OPERATIONS
 
Table N - Reconciliation to GAAP Financial Measures
 
Table O - Financial Information - Westernbank Loans

 
POPULAR, INC.
Financial Supplement to Third Quarter 2017 Earnings Release
Table A - Selected Ratios and Other Information
(Unaudited)
             
  Quarters ended   Nine months ended
    30-Sep-17   30-Jun-17   30-Sep-16   30-Sep-17   30-Sep-16
Basic EPS $ 0.19   $ 0.94   $ 0.44 $ 2.03   $ 2.11
Diluted EPS $ 0.19 $ 0.94 $ 0.44 $ 2.03 $ 2.11
Average common shares outstanding 101,652,352 101,601,552 103,296,443 102,057,607 103,243,851
Average common shares outstanding - assuming dilution 101,763,872 101,708,703 103,465,385 102,185,544 103,383,949
Common shares outstanding at end of period 102,026,417 101,986,758 103,762,596 102,026,417 103,762,596
 
Market value per common share $ 35.94 $ 41.71 $ 38.22 $ 35.94 $ 38.22
 
Market capitalization - (In millions) $ 3,667 $ 4,254 $ 3,966 $ 3,667 $ 3,966
 
Return on average assets 0.20 % 0.94 % 0.49 % 0.69 % 0.79 %
. .
Return on average common equity 1.47 % 7.24 % 3.46 % 5.24 % 5.59 %
 
Net interest margin 3.96 % 4.02 % 4.12 % 4.02 % 4.29 %
 
Common equity per share $ 51.31 $ 51.26 $ 51.37 $ 51.31 $ 51.37
 

Tangible common book value per common share (non-GAAP) [1]

$ 44.79 $ 44.71 $ 44.86 $ 44.79 $ 44.86
 

Tangible common equity to tangible assets (non-GAAP) [1]

10.90 % 11.24 % 12.13 % 10.90 % 12.13 %
 
Tier 1 capital 16.63 % 16.68 % 16.64 % 16.63 % 16.64 %
 
Total capital 19.62 % 19.66 % 19.65 % 19.62 % 19.65 %
 
Tier 1 leverage 10.29 % 10.48 % 11.21 % 10.29 % 11.21 %
 
Common Equity Tier 1 capital     16.63 %     16.68 %     16.64 %     16.63 %     16.64 %

[1] Refer to Table N for the reconciliation to GAAP financial
measures.

 

 
POPULAR, INC.
Financial Supplement to Third Quarter 2017 Earnings Release
Table B - Consolidated Statement of Operations
(Unaudited)
         
Quarters ended Variance Quarter ended Variance Nine months ended
(In thousands, except per share information)   30-Sep-17   30-Jun-17  

Q3 2017
vs. Q2 2017

  30-Sep-16  

Q3 2017
vs. Q3 2016

  30-Sep-17   30-Sep-16
Interest income:    
Loans $ 371,979 $ 367,669 $ 4,310 $ 363,550 $ 8,429 $ 1,102,784 $ 1,096,468
Money market investments 15,529 11,131 4,398 4,568 10,961 33,233 11,320
Investment securities 47,276 48,537 (1,261 ) 37,732 9,544 140,699 110,728
Trading account securities     1,099       1,396       (297 )     1,449       (350 )     3,895       5,013  
Total interest income     435,883       428,733       7,150       407,299       28,584       1,280,611       1,223,529  
Interest expense:
Deposits 37,058 34,092 2,966 32,362 4,696 104,907 92,835
Short-term borrowings 1,524 1,115 409 2,132 (608 ) 3,734 6,051
Long-term debt     19,130       19,047       83       19,118       12       57,222       57,993  
Total interest expense     57,712       54,254       3,458       53,612       4,100       165,863       156,879  
Net interest income 378,171 374,479 3,692 353,687 24,484 1,114,748 1,066,650
Provision for loan losses - non-covered loans 157,659 49,965 107,694 42,594 115,065 249,681 130,202
Provision (reversal) for loan losses - covered loans     3,100       2,514       586       750       2,350       4,255       (1,551 )
Net interest income after provision for loan losses     217,412       322,000       (104,588 )     310,343       (92,931 )     860,812       937,999  
Service charges on deposit accounts 39,273 41,073 (1,800 ) 40,776 (1,503 ) 119,882 120,934
Other service fees 53,481 59,168 (5,687 ) 59,169 (5,688 ) 168,824 169,496
Mortgage banking activities 5,239 10,741 (5,502 ) 15,272 (10,033 ) 27,349 42,050
Net gain and valuation adjustments on investment securities 103 19 84 349 (246 ) 284 1,932
Other-than-temporary impairment losses on investment securities - (8,299 ) 8,299 - - (8,299 ) (209 )
Trading account profit (loss) 253 (655 ) 908 (113 ) 366 (680 ) 842
Net (loss) gain on sale of loans, including valuation adjustments on
loans held-for-sale
(420 ) - (420 ) 8,549 (8,969 ) (420 ) 8,245
Adjustments (expense) to indemnity reserves on loans sold (6,406 ) (2,930 ) (3,476 ) (4,390 ) (2,016 ) (11,302 ) (14,234 )
FDIC loss-share expense (3,948 ) (475 ) (3,473 ) (61,723 ) 57,775 (12,680 ) (77,445 )
Other operating income     12,799       18,151       (5,352 )     18,089       (5,290 )     50,078       46,500  
Total non-interest income     100,374       116,793       (16,419 )     75,978       24,396       333,036       298,111  
Operating expenses:
Personnel costs
Salaries 78,976 77,703 1,273 77,770 1,206 235,055 230,860
Commissions, incentives and other bonuses 16,879 18,295 (1,416 ) 18,528 (1,649 ) 55,252 56,279
Pension, postretirement and medical insurance 11,535 12,590 (1,055 ) 13,413 (1,878 ) 35,369 38,803
Other personnel costs, including payroll taxes     12,246       10,227       2,019       11,513       733       38,382       39,081  
Total personnel costs 119,636 118,815 821 121,224 (1,588 ) 364,058 365,023
Net occupancy expenses 22,254 22,265 (11 ) 21,626 628 65,295 63,770
Equipment expenses 16,457 16,250 207 15,922 535 48,677 45,731
Other taxes 10,858 10,740 118 11,324 (466 ) 32,567 31,689
Professional fees
Collections, appraisals and other credit related fees 3,559 3,779 (220 ) 4,005 (446 ) 11,161 13,479
Programming, processing and other technology services 49,717 51,569 (1,852 ) 52,174 (2,457 ) 149,377 152,270
Legal fees, excluding collections 2,928 2,314 614 11,428 (8,500 ) 8,538 27,691
Other professional fees     14,568       15,272       (704 )     13,659       909       43,880       43,910  
Total professional fees 70,772 72,934 (2,162 ) 81,266 (10,494 ) 212,956 237,350
Communications 5,394 5,899 (505 ) 5,785 (391 ) 17,242 18,117
Business promotion 15,216 13,366 1,850 12,726 2,490 40,158 37,541
FDIC deposit insurance 6,271 6,172 99 5,854 417 18,936 18,586
Other real estate owned (OREO) expenses 11,724 16,670 (4,946 ) 11,295 429 41,212 33,416
Credit and debit card processing, volume, interchange and other
expenses
7,375 6,441 934 3,640 3,735 19,348 15,979
Other operating expenses
Operational losses 13,222 7,215 6,007 19,609 (6,387 ) 27,973 29,416
All other     15,564       7,724       7,840       6,503       9,061       39,785       25,037  
Total other operating expenses 28,786 14,939 13,847 26,112 2,674 67,758 54,453
Amortization of intangibles 2,345 2,344 1 3,097 (752 ) 7,034 9,308
Goodwill impairment charge     -       -       -       3,801      

(3,801

)     -       3,801  
Total operating expenses     317,088       306,835       10,253       323,672       (6,584 )     935,241       934,764  
Income before income tax 698 131,958 (131,260 ) 62,649 (61,951 ) 258,607 301,346
Income tax (benefit) expense     (19,966 )     35,732       (55,698 )     15,839       (35,805 )     48,772       80,550  
Net income   $ 20,664     $ 96,226     $ (75,562 )   $ 46,810     $ (26,146 )   $ 209,835     $ 220,796  
Net income applicable to common stock   $ 19,734     $ 95,295     $ (75,561 )   $ 45,880     $ (26,146 )   $ 207,043     $ 218,004  
Net income per common share - basic   $ 0.19     $ 0.94     $ (0.75 )   $ 0.44     $ (0.25 )   $ 2.03     $ 2.11  
Net income per common share - diluted   $ 0.19     $ 0.94     $ (0.75 )   $ 0.44     $ (0.25 )   $ 2.03     $ 2.11  
Dividends Declared per Common Share   $ 0.25     $ 0.25     $ -     $ 0.15     $ 0.10     $ 0.75     $ 0.45  
 

 
Popular, Inc.
Financial Supplement to Third Quarter 2017 Earnings Release
Table C - Consolidated Statement of Financial Condition
(Unaudited)
        Variance
Q3 2017 vs.
(In thousands)   30-Sep-17   30-Jun-17   30-Sep-16   Q2 2017
Assets:
Cash and due from banks $ 517,437 $ 405,688 $ 350,545 $ 111,749
Money market investments 5,488,212 4,219,630 3,963,495 1,268,582
Trading account securities, at fair value 45,951 50,293 72,584 (4,342 )
Investment securities available-for-sale, at fair value 9,061,001 9,409,402 7,628,656 (348,401 )
Investment securities held-to-maturity, at amortized cost 93,438 96,286 97,973 (2,848 )
Other investment securities, at lower of cost or realizable value 173,965 170,177 168,791 3,788
Loans held-for-sale, at lower of cost or fair value 68,864 69,797 72,076 (933 )
Loans held-in-portfolio:
Loans not covered under loss-sharing agreements with the FDIC 23,302,047 23,046,078 22,714,358 255,969
Loans covered under loss-sharing agreements with the FDIC 524,854 536,341 588,211 (11,487 )
Less: Unearned income 128,597 127,807 118,386 790
Allowance for loan losses     646,913       540,014       555,855       106,899  
Total loans held-in-portfolio, net     23,051,391       22,914,598       22,628,328       136,793  
FDIC loss-share asset 48,470 52,583 152,467 (4,113 )
Premises and equipment, net 532,532 546,986 537,975 (14,454 )
Other real estate not covered under loss-sharing agreements with the
FDIC
176,728 181,096 184,828 (4,368 )
Other real estate covered under loss-sharing agreements with the FDIC 21,545 25,350 37,414 (3,805 )
Accrued income receivable 146,339 136,104 119,691 10,235
Mortgage servicing assets, at fair value 180,157 188,728 200,354 (8,571 )
Other assets 2,329,927 2,108,296 2,163,939 221,631
Goodwill 627,294 627,294 627,294 -
Other intangible assets     38,016       40,361       47,886       (2,345 )
Total assets   $ 42,601,267     $ 41,242,669     $ 39,054,296     $ 1,358,598  
Liabilities and Stockholders' Equity:
Liabilities:
Deposits:
Non-interest bearing $ 7,449,857 $ 7,481,732 $ 6,950,287 $ (31,875 )
Interest bearing     26,799,079       25,640,301       23,376,758       1,158,778  
Total deposits     34,248,936       33,122,033       30,327,045       1,126,903  
Federal funds purchased and assets sold under agreements to
repurchase
374,405 406,385 765,251 (31,980 )
Other short-term borrowings 240,598 1,200 1,200 239,398
Notes payable 1,532,061 1,560,834 1,598,533 (28,773 )
Other liabilities 919,836 874,172 980,057 45,664
Liabilities from discontinued operations     -       -       1,815       -  
Total liabilities     37,315,836       35,964,624       33,673,901       1,351,212  
Stockholders' equity:
Preferred stock 50,160 50,160 50,160 -
Common stock 1,042 1,041 1,040 1
Surplus 4,265,053 4,263,370 4,234,842 1,683
Retained earnings 1,350,730 1,356,504 1,259,295 (5,774 )
Treasury stock (90,222 ) (90,087 ) (7,647 ) (135 )
Accumulated other comprehensive loss     (291,332 )     (302,943 )     (157,295 )     11,611  
Total stockholders' equity     5,285,431       5,278,045       5,380,395       7,386  
Total liabilities and stockholders' equity   $ 42,601,267     $ 41,242,669     $ 39,054,296     $ 1,358,598  
 

 
Popular, Inc.
Financial Supplement to Third Quarter 2017 Earnings Release
Table D - Consolidated Average Balances and Yield / Rate Analysis
- QUARTER
(Unaudited)
                           
Quarter ended Quarter ended Quarter ended Variance Variance
30-Sep-17 30-Jun-17 30-Sep-16 Q3 2017 vs. Q2 2017 Q3 2017 vs. Q3 2016
($ amounts in millions; yields not on a taxable equivalent basis)  

Average
balance

 

Income /
Expense

 

Yield /
Rate

Average
balance

 

Income /
Expense

 

Yield /
Rate

Average
balance

 

Income /
Expense

 

Yield /
Rate

Average
balance

 

Income /
Expense

 

Yield /
Rate

Average
balance

 

Income /
Expense

 

Yield /
Rate

Assets:
Interest earning assets:
Money market, trading and investment securities $ 14,483     $ 63.9   1.76 % $ 14,018     $ 61.1   1.74 % $ 11,159     $ 43.7   1.57 % $ 465     $ 2.8     0.02   % $ 3,324     $ 20.2     0.19   %
Loans not covered under loss-sharing agreements with the FDIC:
Commercial 10,065 128.3 5.06 9,815 122.2 5.00 9,269 113.8 4.88 250 6.1 0.06 796 14.5 0.18
Construction 826 12.0 5.77 812 11.2 5.54 739 10.1 5.44 14 0.8 0.23 87 1.9 0.33
Mortgage 6,444 84.8 5.26 6,518 87.3 5.36 6,637 88.3 5.32 (74 ) (2.5 ) (0.10 ) (193 ) (3.5 ) (0.06 )
Consumer 3,782 99.1 10.40 3,698 97.2 10.55 3,847 99.3 10.27 84 1.9 (0.15 ) (65 ) (0.2 ) 0.13
Lease financing   750       11.9   6.37     727       11.8   6.48     669       11.2   6.72     23       0.1     (0.11 )     81       0.7     (0.35 )  
Total loans (excluding WB loans) 21,867 336.1 6.11 21,570 329.7 6.13 21,161 322.7 6.08 297 6.4 (0.02 ) 706 13.4 0.03
WB loans   1,681       35.9   8.50     1,739       37.9   8.73     1,881       40.9   8.65     (58 )     (2.0 )   (0.23 )     (200 )     (5.0 )   (0.15 )  
Total loans   23,548       372.0   6.28     23,309       367.6   6.32     23,042       363.6   6.29     239       4.4     (0.04 )     506       8.4     (0.01 )  
Total interest earning assets $ 38,031     $ 435.9   4.56 % $ 37,327     $ 428.7   4.60 % $ 34,201     $ 407.3   4.75 % $ 704     $ 7.2     (0.04 ) % $ 3,830     $ 28.6     (0.19 ) %
Allowance for loan losses (566 ) (537 ) (553 ) (29 ) (13 )
Other non-interest earning assets   4,238     4,281     4,443     (43 )   (205 )
Total average assets $ 41,703   $ 41,071   $ 38,091   $ 632   $ 3,612  
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $ 10,465 $ 10.3 0.39 % $ 9,941 $ 8.9 0.36 % $ 7,326 $ 7.0 0.38 % $ 524 $ 1.4 0.03 % $ 3,139 $ 3.3 0.01 %
Savings 8,260 5.0 0.24 8,134 5.0 0.24 7,550 4.6 0.24 126 - - 710 0.4 -
Time deposits   7,543       21.8   1.14     7,661       20.2   1.06     7,859       20.7   1.05     (118 )     1.6     0.08       (316 )     1.1     0.09    
Total interest bearing deposits 26,268 37.1 0.56 25,736 34.1 0.53 22,735 32.3 0.57 532 3.0 0.03 3,533 4.8 (0.01 )
Borrowings   1,982       20.6   4.17     1,936       20.1   4.18     2,398       21.3   3.55     46       0.5     (0.01 )     (416 )     (0.7 )   0.62    
Total interest bearing liabilities   28,250       57.7   0.81     27,672       54.2   0.79     25,133       53.6   0.85     578       3.5     0.02       3,117       4.1     (0.04 )  
Net interest spread 3.75 % 3.81 % 3.90 % (0.06 ) % (0.15 ) %
Non-interest bearing deposits 7,235 7,204 6,676 31 559
Other liabilities 832 869 955 (37 ) (123 )
Liabilities from discontinued operations - - 2 - (2 )
Stockholders' equity   5,386     5,326     5,325     60     61  
Total average liabilities and stockholders' equity $ 41,703   $ 41,071   $ 38,091   $ 632   $ 3,612  
 
Net interest income / margin non-taxable equivalent basis $ 378.2   3.96 % $ 374.5   4.02 % $ 353.7   4.12 % $ 3.7     (0.06 ) % $ 24.5     (0.16 ) %

 
Popular, Inc.
Financial Supplement to Third Quarter 2017 Earnings Release
Table E - Consolidated Average Balances and Yield / Rate Analysis
- YEAR-TO-DATE
(Unaudited)
                 
Nine months ended Nine months ended
30-Sep-17 30-Sep-16 Variance
Average Income / Yield / Average Income / Yield / Average Income / Yield /
($ amounts in millions; yields not on a taxable equivalent basis)   balance   Expense   Rate   balance   Expense   Rate   balance   Expense   Rate
Assets:
Interest earning assets:
Money market, trading and investment securities $ 13,649     $ 177.8   1.74 % $ 10,136     $ 127.0   1.67 % $ 3,513     $ 50.8     0.07   %
Loans not covered under loss-sharing agreements with the FDIC:
Commercial 9,863 369.3 5.01 9,126 335.3 4.91 737 34.0 0.10
Construction 819 34.2 5.57 722 29.1 5.39 97 5.1 0.18
Mortgage 6,522 260.4 5.32 6,736 266.9 5.28 (214 ) (6.5 ) 0.04
Consumer 3,728 291.6 10.46 3,839 296.7 10.32 (111 ) (5.1 ) 0.14
Lease financing   728       35.3   6.46     650       32.9   6.74     78     2.4   (0.28 )
Total loans (excluding WB loans) 21,660 990.8 6.11 21,073 960.9 6.09 587 29.9 0.02
WB loans   1,743       112.0   8.59     1,984       135.6   9.12     (241 )     (23.6 )   (0.53 )  
Total loans   23,403       1,102.8   6.29     23,057       1,096.5   6.35     346       6.3     (0.06 )  
Total interest earning assets $ 37,052     $ 1,280.6   4.62 % $ 33,193     $ 1,223.5   4.92 % $ 3,859     $ 57.1     (0.30 ) %
Allowance for loan losses (548 ) (542 ) (6 )
Other non-interest earning assets   4,277     4,469     (192 )
Total average assets $ 40,781   $ 37,120   $ 3,661  
 
Liabilities and Stockholders' Equity:
Interest bearing deposits:
NOW and money market $ 9,647 $ 27.7 0.38 % $ 6,689 $ 19.2 0.38 % $ 2,958 $ 8.5 - %
Savings 8,146 14.9 0.24 7,438 13.3 0.24 708 1.6 -
Time deposits   7,653       62.3   1.09     7,928       60.3   1.02     (275 )     2.0     0.07    
Total interest bearing deposits 25,446 104.9 0.55 22,055 92.8 0.56 3,391 12.1 (0.01 )
Borrowings   1,981       61.0   4.11     2,382       64.0   3.59     (401 )     (3.0 )   0.52    
Total interest bearing liabilities   27,427       165.9   0.81     24,437       156.8   0.86     2,990       9.1     (0.05 )  
Net interest spread 3.81 % 4.06 % (0.25 ) %
Non-interest bearing deposits 7,156 6,484 672
Other liabilities 865 937 (72 )
Liabilities from discontinued operations - 2 (2 )
Stockholders' equity   5,333     5,260     73  
Total average liabilities and stockholders' equity $ 40,781   $ 37,120   $ 3,661  
 
Net interest income / margin non-taxable equivalent basis $ 1,114.7   4.02 % $ 1,066.7   4.29 % $ 48.0     (0.27 ) %
 

               
Financial Supplement to Third Quarter 2017 Earnings Release
Table F - Mortgage Banking Activities and Other Service Fees
(Unaudited)
 
Mortgage Banking Activities
Quarters ended Variance Nine months ended Variance
(In thousands)   30-Sep-17   30-Jun-17   30-Sep-16  

Q3 2017
vs.Q2 2017

 

Q3 2017
vs.Q3 2016

  30-Sep-17   30-Sep-16  

2017 vs.
2016

Mortgage servicing fees, net of fair value adjustments:
Mortgage servicing fees $ 12,012 $ 13,021 $ 14,520 $ (1,009 ) $ (2,508 ) $ 38,485 $ 43,997 $ (5,512 )
Mortgage servicing rights fair value adjustments     (10,262 )     (8,046 )     (6,062 )     (2,216 )     (4,200 )     (24,262 )     (18,879 )     (5,383 )
Total mortgage servicing fees, net of fair value adjustments     1,750       4,975       8,458       (3,225 )     (6,708 )     14,223       25,118       (10,895 )
Net gain on sale of loans, including valuation on loans held-for-sale     4,244       7,250       8,857       (3,006 )     (4,613 )     16,875       24,441       (7,566 )
Trading account loss:
Unrealized (losses) gains on outstanding derivative positions (147 ) 83 95 (230 ) (242 ) (104 ) (44 ) (60 )
Realized losses on closed derivative positions     (608 )     (1,567 )     (2,138 )     959       1,530       (3,645 )     (7,465 )     3,820  
Total trading account loss     (755 )     (1,484 )     (2,043 )     729       1,288       (3,749 )     (7,509 )     3,760  
Total mortgage banking activities   $ 5,239     $ 10,741     $ 15,272     $ (5,502 )   $ (10,033 )   $ 27,349     $ 42,050     $ (14,701 )
 
Other Service Fees
Quarters ended Variance Nine months ended Variance
(In thousands)   30-Sep-17   30-Jun-17   30-Sep-16  

Q3 2017
vs.Q2 2017

 

Q3 2017
vs.Q3 2016

  30-Sep-17   30-Sep-16  

2017 vs.
2016

Other service fees:
Debit card fees $ 10,359 $ 11,576 $ 11,483 $ (1,217 ) $ (1,124 ) $ 33,478 $ 34,153 $ (675 )
Insurance fees 13,076 13,529 15,943 (453 ) (2,867 ) 39,410 42,678 (3,268 )
Credit card fees 16,699 19,305 17,644 (2,606 ) (945 ) 54,280 52,202 2,078
Sale and administration of investment products 5,496 5,799 5,542 (303 ) (46 ) 16,377 15,798 579
Trust fees 4,817 4,903 4,968 (86 ) (151 ) 14,675 14,029 646
Other fees     3,034       4,056       3,589       (1,022 )     (555 )     10,604       10,636       (32 )
Total other service fees   $ 53,481     $ 59,168     $ 59,169     $ (5,687 )   $ (5,688 )   $ 168,824     $ 169,496     $ (672 )
 

         
Popular, Inc.
Financial Supplement to Third Quarter 2017 Earnings Release
Table G - Loans and Deposits
(Unaudited)
 
Loans - Ending Balances
Variance
(In thousands)   30-Sep-17   30-Jun-17   30-Sep-16  

Q3 2017 vs.
Q2 2017

 

Q3 2017 vs.
Q3 2016

Loans not covered under FDIC loss-sharing agreements:
Commercial $ 11,227,095 $ 11,047,359 $ 10,537,191 $ 179,736 $ 689,904
Construction 823,325 784,389 731,352 38,936 91,973
Legacy [1] 37,508 39,067 47,914 (1,559 ) (10,406 )
Lease financing 754,881 743,603 682,810 11,278 72,071
Mortgage 6,529,235 6,552,796 6,774,497 (23,561 ) (245,262 )
Consumer     3,801,406     3,751,057     3,822,208     50,349       (20,802 )
Total non-covered loans held-in-portfolio $ 23,173,450 $ 22,918,271 $ 22,595,972 $ 255,179 $ 577,478
Loans covered under FDIC loss-sharing agreements     524,854     536,341     588,211     (11,487 )     (63,357 )
Total loans held-in-portfolio   $ 23,698,304   $ 23,454,612   $ 23,184,183   $ 243,692     $ 514,121  
Loans held-for-sale:
Mortgage     68,864     69,797     72,076     (933 )     (3,212 )
Total loans held-for-sale   $ 68,864   $ 69,797   $ 72,076   $ (933 )   $ (3,212 )
Total loans   $ 23,767,168   $ 23,524,409   $ 23,256,259   $ 242,759     $ 510,909  
[1] The legacy portfolio is comprised of commercial loans,
construction loans and lease financings related to certain lending
products exited by the Corporation as part of restructuring efforts
carried out in prior years at the BPNA segment.
 
Deposits - Ending Balances
Variance
(In thousands)   30-Sep-17   30-Jun-17   30-Sep-16  

Q3 2017 vs. Q2
2017

 

Q3 2017 vs.Q3
2016

Demand deposits [1] $ 11,576,048 $ 11,194,860 $ 9,161,839 $ 381,188 $ 2,414,209
Savings, NOW and money market deposits (non-brokered) 14,638,191 13,946,680 12,872,072 691,511 1,766,119
Savings, NOW and money market deposits (brokered) 422,174 424,303 391,128 (2,129 ) 31,046
Time deposits (non-brokered) 7,446,922 7,361,587 7,619,232 85,335 (172,310 )
Time deposits (brokered CDs)     165,601     194,603     282,774     (29,002 )     (117,173 )
Total deposits   $ 34,248,936   $ 33,122,033   $ 30,327,045   $ 1,126,903     $ 3,921,891  
[1] Includes interest and non-interest bearing demand deposits.
 

 
Popular, Inc.
Financial Supplement to Third Quarter 2017 Earnings Release
Table H - Non-Performing Assets
(Unaudited)
              Variance
(Dollars in thousands)   30-Sep-17  

As a % of
loans HIP by
category

    30-Jun-17  

As a % of
loans HIP by
category

    30-Sep-16  

As a % of
loans HIP by
category

   

Q3 2017 vs.
Q2 2017

 

Q3 2017 vs.
Q3 2016

Non-accrual loans:  
Commercial $ 165,352 1.5 % $ 166,864 1.5 % $ 170,571 1.6 % $ (1,512 ) $ (5,219 )
Construction 99 - - - - 99 99
Legacy [1] 3,268 8.7 3,360 8.6 3,450 7.2 (92 ) (182 )
Lease financing 2,684 0.4 2,065 0.3 2,878 0.4 619 (194 )
Mortgage 352,315 5.4 318,922 4.9 345,776 5.1 33,393 6,539
Consumer     62,210   1.6       55,918   1.5       56,650   1.5       6,292       5,560  

Total non-performing loans held-in-portfolio, excluding covered
loans

585,928 2.5 % 547,129 2.4 % 579,325 2.6 % 38,799 6,603

Other real estate owned ("OREO"), excluding covered OREO

    176,728           181,096           184,828           (4,368 )     (8,100 )

Total non-performing assets, excluding covered assets

762,656 728,225 764,153 34,431 (1,497 )
Covered loans and OREO     24,951           29,376           41,211           (4,425 )     (16,260 )
Total non-performing assets   $ 787,607         $ 757,601         $ 805,364         $ 30,006     $ (17,757 )
Accruing loans past due 90 days or more [3]   $ 465,127         $ 391,569         $ 418,652         $ 73,558     $ 46,475  
Ratios excluding covered loans:

Non-performing loans held-in-portfolio to loans held-in-portfolio

2.53 % 2.39 % 2.56 %

Allowance for loan losses to loans held-in-portfolio

2.65 2.22 2.33

Allowance for loan losses to non-performing loans, excluding loans
held-for-sale

    104.77           93.07           90.73              
Ratios including covered loans:
Non-performing assets to total assets 1.85 % 1.84 % 2.06 %

Non-performing loans held-in-portfolio to loans held-in-portfolio

2.49 2.35 2.52

Allowance for loan losses to loans held-in-portfolio

2.73 2.30 2.40

Allowance for loan losses to non-performing loans, excluding loans
held-for-sale

    109.77           97.98           95.32              
[1] The legacy portfolio is comprised of commercial loans,
construction loans and lease financings related to certain lending
products exited by the Corporation as part of restructuring efforts
carried out in prior years at the BPNA segment.
[2] There were no non-performing loans held-for-sale as of September
30, 2017, June 30, 2017 and September 30, 2016.
[3] It is the Corporation's policy to report delinquent residential
mortgage loans insured by FHA or guaranteed by the VA as accruing
loans past due 90 days or more as opposed to non-performing since
the principal repayment is insured. These balances include $157
million of residential mortgage loans insured by FHA or guaranteed
by the VA that are no longer accruing interest as of September 30,
2017 (June 30, 2017 - $160 million; September 30, 2016 - $174
million). Furthermore, the Corporation has approximately $57 million
in reverse mortgage loans which are guaranteed by FHA, but which are
currently not accruing interest. Due to the guaranteed nature of the
loans, it is the Corporation's policy to exclude these balances from
non-performing assets (June 30, 2017 - $57 million; September 30,
2016 - $72 million).
 

 
Popular, Inc.
Financial Supplement to Third Quarter 2017 Earnings Release
Table I - Activity in Non-Performing Loans
(Unaudited)
         
Commercial loans held-in-portfolio:
Quarter ended Quarter ended
30-Sep-17   30-Jun-17
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 162,863 $ 4,001 $ 166,864 $ 175,477 $ 3,764 $ 179,241
Plus:
New non-performing loans 8,085 4,027 12,112 13,809 1,027 14,836
Advances on existing non-performing loans - - - - 4 4
Less:
Non-performing loans transferred to OREO (76 ) - (76 ) (2,442 ) - (2,442 )
Non-performing loans charged-off (3,587 ) (49 ) (3,636 ) (19,184 ) (22 ) (19,206 )
Loans returned to accrual status / loan collections     (7,242 )     (2,670 )     (9,912 )     (4,797 )     (772 )     (5,569 )
Ending balance NPLs   $ 160,043     $ 5,309     $ 165,352     $ 162,863     $ 4,001     $ 166,864  
 
Construction loans held-in-portfolio:
Quarter ended Quarter ended
30-Sep-17   30-Jun-17
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ - $ - $ - $ - $ - $ -
Plus:
New non-performing loans     99       -       99       -       -       -  
Ending balance NPLs   $ 99     $ -     $ 99     $ -     $ -     $ -  
 
Mortgage loans held-in-portfolio:
Quarter ended Quarter ended
30-Sep-17   30-Jun-17
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 306,642 $ 12,280 $ 318,922 $ 319,450 $ 11,889 $ 331,339
Plus:
New non-performing loans 97,314 5,349 102,663 81,582 4,990 86,572
Less:
Non-performing loans transferred to OREO (9,408 ) - (9,408 ) (12,229 ) - (12,229 )
Non-performing loans charged-off (10,864 ) (66 ) (10,930 ) (14,123 ) (580 ) (14,703 )
Loans returned to accrual status / loan collections     (45,717 )     (3,215 )     (48,932 )     (68,038 )     (4,019 )     (72,057 )
Ending balance NPLs   $ 337,967     $ 14,348     $ 352,315     $ 306,642     $ 12,280     $ 318,922  
 
           
Legacy loans held-in-portfolio:
Quarter ended Quarter ended
30-Sep-17   30-Jun-17
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ - $ 3,360 $ 3,360 $ - $ 3,335 $ 3,335
Plus:
New non-performing loans - - - - 114 114
Advances on existing non-performing loans - 64 64 - 8 8
Less:
Non-performing loans charged-off - (14 ) (14 ) - (11 ) (11 )
Loans returned to accrual status / loan collections     -       (142 )     (142 )     -       (86 )     (86 )
Ending balance NPLs   $ -     $ 3,268     $ 3,268     $ -     $ 3,360     $ 3,360  
 
Total non-performing loans held-in-portfolio (excluding consumer
and covered loans):
Quarter ended Quarter ended
30-Sep-17   30-Jun-17
(In thousands)   BPPR   BPNA   Popular, Inc.   BPPR   BPNA   Popular, Inc.
Beginning balance NPLs $ 469,505 $ 19,641 $ 489,146 $ 494,927 $ 18,988 $ 513,915
Plus:
New non-performing loans 105,498 9,376 114,874 95,391 6,131 101,522
Advances on existing non-performing loans - 64 64 - 12 12
Less:
Non-performing loans transferred to OREO (9,484 ) - (9,484 ) (14,671 ) - (14,671 )
Non-performing loans charged-off (14,451 ) (129 ) (14,580 ) (33,307 ) (613 ) (33,920 )
Loans returned to accrual status / loan collections     (52,959 )     (6,027 )     (58,986 )     (72,835 )     (4,877 )     (77,712 )
Ending balance NPLs   $ 498,109     $ 22,925     $ 521,034     $ 469,505     $ 19,641     $ 489,146  

 
Popular, Inc.
Financial Supplement to Third Quarter 2017 Earnings Release
Table J - Allowance for Credit Losses, Net Charge-offs and
Related Ratios
(Unaudited)
                 
Quarter ended Quarter ended Quarter ended
    30-Sep-17   30-Jun-17   30-Sep-16
(Dollars in thousands)  

Non-covered
loans

 

Covered
loans

  Total  

Non-covered
loans

 

Covered
loans

  Total  

Non-covered
loans

 

Covered
loans

  Total
Balance at beginning of period $ 509,206 $ 30,808 $ 540,014 $ 516,725 $ 27,771 $ 544,496 $ 518,139 $ 30,581 $ 548,720
Provision (reversal) for loan losses     157,659       3,100     160,759       49,965       2,514       52,479       42,594       750     43,344  
      666,865       33,908     700,773       566,690       30,285       596,975       560,733       31,331     592,064  
Net loans charged-off (recovered):
BPPR
Commercial [2] (438 ) - (438 ) 11,745 - 11,745 3,199 - 3,199
Construction (50 ) - (50 ) (2,370 ) - (2,370 ) 886 - 886
Lease financing 1,495 - 1,495 1,438 - 1,438 816 - 816
Mortgage 17,071 831 17,902 20,753 (538 ) 20,215 15,237 661 15,898
Consumer     27,223       20     27,243       22,689       15       22,704       12,821       408     13,229  
Total BPPR     45,301       851     46,152       54,255       (523 )     53,732       32,959       1,069     34,028  
 
BPNA
Commercial 4,282 - 4,282 (643 ) - (643 ) (1,173 ) - (1,173 )
Legacy [1] (297 ) - (297 ) (298 ) - (298 ) (520 ) - (520 )
Mortgage (174 ) - (174 ) 462 - 462 1,942 - 1,942
Consumer     3,897       -     3,897       3,708       -       3,708       1,932       -     1,932  
Total BPNA     7,708       -     7,708       3,229       -       3,229       2,181       -     2,181  
Total loans charged-off - Popular, Inc.     53,009       851     53,860       57,484       (523 )